McDonald's dropped salads, yet salad chains are growing
Originally written in Chinese. Translated with AI, reviewed by Gary. Read the Chinese original →
A while ago I was talking with an American F&B investor, and we got onto McDonald's decision last year to stop selling salads altogether. The main reason is that salads need a fresh-produce supply chain and have a short shelf life, so they are hard to run at scale. By contrast, high-sugar, high-salt fast food is easier to standardise and produce cheaply, and it fits the SCATT investment logic (Sugar, Caffeine, Alcohol, Tea, Tobacco): categories with huge market potential because they are addictive. Fast food, coffee and bubble tea can quickly expand to tens of thousands of outlets, while salad brands selling on health often hit a ceiling at 20 to 30 stores.
Recently, though, the market seems to be changing.
Sweetgreen, an American salad chain, has opened 130 stores and is worth US$2.6 billion. Just Salad recently raised US$200 million at a US$1 billion valuation. A few observations:
Changing consumer habits
For decades, consumers were shaped by fast-food culture and developed a taste for high-sugar, high-salt food. In recent years, though, people have become more health-conscious, wellness is everywhere, and they are willing to pay a premium for light, healthy food. At the same time, fiercer cost competition in fast food keeps making unhealthy food cheaper, while the space for healthy food keeps growing.
Better industrial infrastructure
One key reason McDonald's succeeded is the industrialisation of its food supply chain. Large-scale frozen-food factories, plus an efficient logistics network, supported its global store expansion and made its products standardised, cheap and easy to replicate.
Fresh-food supply chains, on the other hand, have long been the bottleneck for light-meal brands. Vegetables don't keep, logistics are expensive, and that makes chain expansion hard. But as technology advances, this problem is gradually being solved. Sweetgreen, for example, uses a different model from traditional fast food: it works with 200 local farms and uses information systems to trace its supply chain "seed to table", which has let it open stores faster.
Segmentation
McDonald's cut salads to focus on its core fast-food market, while healthy-food brands focus on niches like light meals and fitness. It shows that in today's competition, a brand can't try to "do everything". It should focus on its core strengths and serve a specific group precisely, and that's how it builds a stable market position.
Challenges ahead
The healthy-food market is growing, but even the category leader, Sweetgreen, still isn't profitable. Its future remains to be seen.
The market for healthy light-meal chains is expanding, demand is rising, and supply-chain infrastructure keeps improving, but the industry still faces the challenge of a profitable model. Whether these brands can break through the limits of fresh supply chains and achieve profitable growth at fast-food scale, only time will tell.